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How does a credit card reader work?

Every year in the UK more and more transactions are carried out with debit and credit cards, at least 70%. Owning a credit card reader is now standard practice amongst most businesses and having the facility to do this is essential if you wish to take payments online or over the phone.

credit card reader

Preparing to accept credit card payments

Before you can begin debit or credit card processing there are a few things you need to set up and the whole process could take around a month.

  • Merchant account.

Finding a merchant account is the first, and hardest, step in taking credit card payments. Start this process as early as you can, in case of any problems which will lead to delays. You don’t want to have everything else set up, including customers who want to pay, but have no merchant account to authorise payment. This account can be with a bank or payment service provider, so make sure you search around for the best rates and lowest set up fees. You will need to go through an application process where you will be asked for figures such as projected sales per month and turnover. PayPal is a form of merchant account, but not always appropriate for a business user taking lots of card transactions.

  • Credit card reader.

The next step is to purchase or lease your credit card reader. This is the device that takes payment from the customer’s card, connects to the merchant account provider and provides authorisation for the transaction.  You can choose between countertop credit card terminals and mobile card readers with dial-up, IP or wireless connections depending on how your business interacts with its customers. It is possible to buy this outright, although it is more common to hire your credit card reader from a card terminal provider, who, for a monthly fee, will also service the device.

  • Receipt printer.

For every transaction carried out on a business card payment terminal, a receipt has to be issued. Credit card readers will either have an inbuilt receipt printer or a stand-alone unit and you will have the choice between a dot matrix printer and the more expensive (but faster) thermal printer.

  • Connection.

Depending on what type of credit or debit card reader you choose to use, you will need to make sure the required internet connection or phone line is in place.

Differences between debit and credit cards

All card payment terminals will accept debit as well as credit cards (debit and credit card readers are the same device), but the interchange fees charged are worked out slightly differently. With a credit card, you will be charged on a pre-determined percentage of the card transaction, but a debit card will usually be charged at a flat fee per transaction, no matter how much was spent. And each card (Visa, MasterCard, American Express etc.) will have different fee structures.

The UK Cards Association offer a wealth of information to both retailers and consumers about all types of card payment and The Office of Fair Trading (the independent government body who regulate economic services in the UK) can advise businesses with any concerns or issues with merchant accounts or credit cards.

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